By Tiernan Ray

Shares of Microsoft (MSFT) have been picking up momentum throughout the session, after starting out just modestly above the prior close, with the stock currently up $1.09, or almost 4%, at $29.68, and rising as high as $29.82.

The shares’ 52-week high is $32.89.

There’s no immediate news to prompt the rise, with yesterday’s big news having been the company’s sale of its “Mediaroom” television set-top properties to Ericsson (ERIC). There are no prominent brokerage notes out today, at least, that I can see.

There was a brief note in The Seattle Times today by Janet Tu saying that the company resolved a software licensing dispute with Brazilian aircraft manufacturer Embraer.

There has been various reporting here and there about the forthcoming update to Microsoft’s Windows 8, called Windows Blue, and it’s possible speculation about that update is cheering some investors.

I would note that Intel (INTC) shares are also up nicely, rising 73 cents, or 3.5%, to $21.82. There hasn’t been much news on Intel today, but there was a very promising piece about the company’s forthcoming interactive television effort by Ad Age‘s Michael Learmonth published yesterday. That project has been Intel’s own effort and does not appear to involve Microsoft directly.

Update: It appears that one proximate cause, at least in part, may be a lengthy note out from Bernstein Research‘s Mark Moerdler, who has an Outperform rating on the shares, and a $37 price target.

The 20-page opus, titled “Exchange rocketing into the cloud,” discusses how Microsoft’s Exchange email server, along with some other cloud-based applications, could become a $4 billion to $9 billion “software-as-a-service” portion of the company’s “Office 365” cloud software suite.

The transition of Exchange to running in a hosted data center for a fee is “extremely significant” for Microsoft, Moerdler believes, because “We believe that Microsoft Exchange / Office 365 will be significantly larger than any of the current SaaS companies and this growth can be generated by selling to existing customers rather than having to capture new customers.”

Moerdler describes how Exchange is the front line in Microsoft moving much of its business software to the cloud:

We understand that the company wants to move a significant portion ofits Microsoft Business Division and Server and Tools businesses to the Cloud. Within Microsoft Business Division (MBD) we believe Microsoft is seeing the highest success rate moving its Exchange email customers to Exchange Online or to a more comprehensive solution called Office 365.

Moerdler models Exchange revenue last year at $1.97 billion, and the company’s “Sharepoint” collaboration suite at $1.79 billion. If the Exchange deployments in the cloud were to reach $6.33 billion, it could be worth 23 cents per share of upside for the company in net income per share, at the midpoint of his estimate.

That assumes, mind you, that the total amount of “on-premise” Exchange, the stuff installed in companies’ facilities, as it is today, shrinks to just $393 million, meaning an almost complete reversal of Exchange from on-premise to cloud.

A revenue stream of $4 billion to $9 billion annually would be more than calendar 2012 revenue of $3.05 billioin that Salesforce.com (CRM), the poster child of cloud software, brought in, observes Moerdler. It would also be more than younger cloud software makers such as NetSuite (N) ($309 million), Workday (WDAY) ($274 million), Constant Contact ($252 million), ServiceNow (NOW) ($244 million), and LivePerson (LPSN) ($157 million).

Moerdler adds the caveat that the Street could use more details from Microsoft about pricing and such:

We note that we have made numerous assumptions as to pricing mix, client mix and costs and we invite Microsoft, now that we have outlined the economics of the migration to supply additional relevant details which will help the street understand and model the migration to the Cloud. We understand that the company plans to supply details at the end of the fiscal and look forward to the data.

Update 2: Raymond James‘s Michael Turits, who has a Market Outperform rating on Microsoft shares, and a $34 price target, had some positive thoughts to share about Microsoft in a phone call, although he hasn’t actually published on the stock today.

Turits tells me that at 7 times forward free cash flow estimates, the stock is already pricing in the secular challenges regarding the PC market. He think the stock does not, however, reflect potential upside for Microsoft with both enterprise and consumer customers.

Turits’s checks of enterprise resellers suggest that the pace of Windows 7migrations has picked up, which tends to lead to “pull-through” of other products such as the Lync chat application and Microsoft Office. Checks regarding Microsoft’s “Server & Tools” business also look good, he said.

As far as consumers, Microsoft still has a “strong” user base with Xbox, and a healthy upgrade cycle to look forward to, he writes. While it’s true that PC estimates have continued to come down, the Street may be starting to look beyond that bad news, thinks Turits, to instead ask a broader question about whether Windows 8 will be successful on PCs but also tablet computers and phones.

“It’s important to see potential for Microsoft to gain share outside of PCs,” he tells me. “That may happen as more of the additional value becomes apparent in touch-based user interfaces, as the number and quality of such devices begins to improve.”

MS will see $17 before it ever sees $37. These analysts have their heads up their ass. Nothing MS is doing in the cloud, or anywhere else for that matter, has a likely potential of even making up for what they're losing/going to lose in Windows and Office due to the continued decline of the PC market (look at tonight's action where the stock is down 1.4% on news of the worst PC Q since 2006). If earnings don't grow and in fact decline, how do you get to a $34 or $37 target? Why would the market suddenly pay a higher P/E for a company that is being disrupted and obsoleted? MS is a now long term short. It has lost in smartphones and tablets, its PC business is being obsoleted, and its other businesses are either unprofitable or barely so. The only short term risk in shorting it is Ballmer finally getting fired or the end of life for XP. The former could pop the stock a buck or two, but will be short lived. And it's possible, though unlikely, that the EOL for WP results in a big rush of migration business over the next three Q's which counteracts the decline in PC sales. But other than that, nada. And even if Ballmer is fired and they get an insanely great CEO, that person would require years to undo the damage and mount a successful turnaround.

About Tech Trader Daily

Tech Trader Daily is a blog on technology investing written by Barron’s veteran Tiernan Ray. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields. Comments and tips can be sent to: techtraderdaily@barrons.com.